Simpson-Bowles call for an additional $2.4 trillion in deficit reduction

Former Senator Alan Simpson (R-Wy.) and former Clinton White House Chief of Staff Erskine Bowles are pressing Congress and the Obama administration to reduce the deficit by another $2.4 trillion over the next decade to “put the debt on a downward path as a share of the economy.”

“Over the medium and long-term, our debt is projected to continue growing faster than the economy. It is simply on an unsustainable path,” the pair wrote in their latest deficit reduction blueprint “A Bipartisan Path Forward to Securing America’s Future”. “The longer we wait the fewer options we will have and the less time we will be able to give individuals and businesses to prepare and adjust.”

Simpson and Bowles, who co-chaired President Barack Obama’s National Commission on Fiscal Responsibility and Reform, argued that the nation’s debt should be “gradually” brought down to 70% of GDP by early next decade.

“What’s the most important thing we need to do is stabilize the debt and keep it on a downward path as a percentage of GDP,” said Bowles at the Politico Playbook Breakfast on Feb. 19th.

Doing so would require another $2.4 trillion in cuts of which 25% would come from health care reductions, 25% from tax reform, and 50% from a combination of mandatory spending cuts, stronger caps on discretionary spending, adoption of chained CPI (consumer price index), and lower debt interest payments.

The health care reductions under the Simpson-Bowles plan would be achieved by cutting Medicare payments to providers, increasing Medicare premiums for higher-income retirees, and reducing drug costs.

The tax reforms proposed would eliminate nearly all tax expenditures that Simpson pointed out cost the country about $1 trillion per year.

“180 tax expenditures in the tax code. They’re nothing but spending by any other name. They’re loopholes. They’re deductions. They’re all the works. And guess what? Only 20% of the American people use 80% of them,” said Simpson.

Eliminating the tax expenditures, particularly those that benefit the higher-income earners, would help simplify the tax code and broaden the base or the types of incomes that can be taxed. This, he explained, would raise additional revenue to help pay down the deficit.

In addition to these cuts, Simpson-Bowles have called on Congress to reform Social Security to ensure its solvency beyond 2031 and cap the federal government’s spending on health care to close to the GDP.

“We need to have more cost-sharing with appropriate protections for low-income beneficiaries. We need to have means-testing. We need to get serious about population aging,” said Bowles. “We need to have tort reform. We need to have savings from what we pay to the drug manufacturers, and we need to pay for quality rather than quantity. All of those are really important.”